“The world is flat,” columnist Thomas Friedman proclaimed in 2005, and everyone who matters agrees with him. The question that Friedman doesn’t really answer is, what do we do about it? In the upcoming “Economy 4.0” series, I will try to provide some answers. In the first essay in that series, “Peak Performance in a Flat World,” I make a number of key points:
- New Urban Regions are replacing nation-states as the key economic-development players in the globally competitive trading system. NURs can be seen as labor markets, or repositories of human capital, comprised of individuals with a specific constellation of educational attributes and economically useful skill sets.
- There is no easy path to prosperity. The only way to raise living standards is to increase the productivity of the workforce and the innovation of its businesses. Virginia needs to create a culture of productivity and innovation. Human capital is the key to achieving both; all else follows.
- Virginia regions, for the most part, are mired in outmoded economic development paradigms focused on recruiting outside corporate investment and, to a lesser degree, cultivating the growth of home-growth entrepreneurial companies. Both tasks remain important, but they are not sufficient to maintain regional competitive advantage.
- The next stage of economic development is to systematically develop a region’s human capital through education and training of the population, as well as recruitment and retention of individuals who possess cutting-edge knowledge and skills — the so-called “creative class.”
- Recruiting and retaining members of the creative class adds a new dimension to economic development: building the kinds of communities where “creatives” want to live.
- Any economic development strategy also must be economically and environmentally sustainable, minimizing resource consumption and its adverse environmental impacts.
Virginia has a lot of work ahead. Virginia’s economic performance (as measured by per capita income expressed as a percentage of the national average) stagnated between 1985 and 2000, and has picked up since then mainly due to the injection of federal dollars in the post 9/11 era. That development, which has benefited Northern Virginia and Hampton Roads primarily, reflects the large presence of the military-industrial complex in the state economy, not an improvement in underlying competitiveness.
We’ve been lulled into complacency by ratings that proclaim Virginia the “best state” for business. We may be the best state under the old economic-development paradigm of recruiting corporate investment. But that’s like saying you’re the best mini-computer manufacturer when the world has evolved to PCs. We need to re-think what it takes to prosper in a globally competitive knowledge economy, which in turn means re-thinking how to build more livable, sustainable regions.